Fed chair Janet Yellen came to Capitol Hill Tuesday and Wednesday telling both senators and representatives how stuck between a rock and a hard place she is.
The questions lobbed at Yellen were partisan and never hit the mark of what is truly wrong with the US economy.
Market reaction — rather than pundit obfuscation — told the story. Despite being at zero interest rate for 7 years there’s no inflation fear on the horizon, as bond traders moved yields lower.
As I have said earlier this year, Yellen & Co. can jawbone all they want on ending ZIRP bu raising rates, but they can’t.
There’s no velocity in this economy that can support even a 25bps move.
Chair Yellen certainly took a June rate rise out of the equation in her remarks, but would not or better yet could not tell the Hill that 2015 is off the table.
The Fed is more worried about stagflation morphing into disinflation since it has no tools like lowering rates to deal with it.
As an aside, the Fed must be happy with the recent announcements by retailers on raising wages for their employees, since the economy needs — but can’t get — wage inflation in order to buoy consumer buying to move the economy forward.
Much more on this to come.